With key swing states Florida and Ohio falling to Trump the New York Times is gauging the probability of a Trump win at more than 95% (a virtual certainty that he will be the next US President at this point):
Equity futures have slumped around 4% while gold futures have soared more than 3%:
Given what markets were already looking forward to in terms of a December rate hike and Hillary’s economic proposals, a Trump win is especially bullish for gold and here’s why:
- A Fed rate hike cycle is pushed out even further and there is a better than 50% that there will not be a December rate hike.
- Trump’s economic policy proposals are likely to shave a considerable amount off GDP growth due to trade protectionism, this will result in more accommodative monetary policy for longer.
- Trade protectionism and weaker growth are dollar negatives.
- Trump is a wild card and much more of a destabilizing President than a President Hillary Clinton would be, gold does better in a chaotic backdrop as a flight to safety asset.
- Foreign central banks are more likely to be accommodative in their monetary policy stance to counteract what they deem to be a chaotic environment in the US.
Gold investors have just been rewarded for their perseverance and with the yellow metal surpassing $1320 in overnight futures trading the key $1310 level becomes support once again.
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